Research On The Formation Mechanism And Contagion Effect Of Asset Price Bubble In China

In recent decades,many countries in the world have experienced the boom and bust of asset price bubbles and the subsequent economic recession.Such as Japan's bubble economy,the US Dot bubble and the global financial crisis in 2008,etc.were all accompanied by a massive asset price bubble collapse.These events have made theoretical researchers and practitioners aware of the importance of research on potential risks of asset price bubbles.Although there has not been a large-scale bubble collapse in China,the frequent threat of asset prices and the bubble of asset prices are also a potential threat to China's economic operation.For example,after housing reform in 1998,the real estate market in China has experienced a general rise for 20 years.Nowadays,the real estate market is regarded as the largest "grey rhinoceros" in the economic development of China by the Central Bank of China.After the abnormal fluctuations in China's stock market in 2015,the serious capital flight phenomenon caused by asset price bubbles and the misallocation of capital have made the effectiveness of China's capital market serving the real economy significantly reduced.Now,under the influence of the New Coronavirus pneumonia crisis,the global central bank's "big drain" has been the cause of global liquidity because of the purpose of economic assistance,and too much liquidity is likely to further breed new asset price bubbles.Therefore,based on the current situation of asset market in China,takes asset price bubbles as the research object,and uses the research paradigm of theoretical analysis and empirical analysis to carry out research.Based on the research context of "identification and measurement ? formation mechanism ? influence effect ?policy governance",this paper systematically studies the identification and measurement,formation mechanism,contagion effect and policy governance of asset price bubbles.This is not only significant for understanding the operational mechanism of asset price bubbles in China,but also very important for China's policy requirements of preventing systemic financial risks.The first chapter focuses on the identification and measurement of asset price bubbles,formation mechanism,contagion effect and policy effect of literature review,and gives the research framework of this paper.The second chapter introduces the connotation and formation process of asset price bubble,as well as the theoretical basis of rational asset price bubble and irrational asset price bubble.In the part of rational asset price bubbles,this chapter also introduces the theoretical definition of endogenous and exogenous asset price bubbles.As for irrational asset price bubbles,this paper mainly introduces the formation mechanism of irrational asset price bubbles induced by heterogeneous beliefs and limited arbitrage,noise trading theory and bubble riding theory.The third chapter identifies the real estate price bubbles in China's stock market and major cities based on the PSY procedure.First,this chapter introduces the testing principle and recursive algorithm of PSY identification method,and then identifies asset price bubbles in China's main asset markets.The study found that in the sample interval,China's stock market and the real estate market have experienced a frequent bubble process,for example,the Shanghai Stock market,Shenzhen Stock market and the gem stock market have identified a complete bubble interval.The main bubbles range from April 2007 to October and March 2015 to June.In the identification of housing price bubbles in municipal cities,the sample cities generally experienced different frequency bubble cycles,focusing on the period from June 2016 to August2017.In terms of bubble toughness,in the stock market,the bubble toughness of the Shanghai Stock market is stronger than that of the Shenzhen Stock market.In the real estate market,the first-tier cities are stronger than the new first-tier cities;and the new first-tier cities are stronger than the second and third-tier cities.The asset market with higher resilience has a long duration of bubbles and it is not easy for asset price bubbles to burst.The fourth chapter focuses on the mechanism of credit policy on the formation of real estate price bubble.Firstly,this chapter theoretically demonstrates the pricing relationship between asset price bubbles and financial leverage and concludes that the existence of financial leverage will lead to the emergence of positive asset price bubbles under the premise that the default probability is greater than zero.In order to verify the above theoretical results,this paper uses the NARDL model to empirically analyze the long-term and short-term asymmetric effects of sub-sector macro leverage ratio on China's real estate price bubbles.The empirical results show that,firstly,the negative adjustment of the leverage ratio of the real economy sector and the financial sector will effectively restrain the continuous expansion of the real estate price bubble in the long term,but the one-size-fits all deleveraging of the real economy sector is not conducive to the long-term stable operation of the real estate market.Secondly,in the long run,leverage transfer from the non-financial enterprise sector to the residential sector can be used to moderate the real estate price bubble.Finally,the central government's forward-looking guidance on leverage should be effectively and reasonably exerted.Instead of implementing strong deleveraging policies for local governments,the policy authorities should try to smooth the fluctuation of local government debt so as not to cause the risk of local real estate price bubbles.The fifth chapter focuses on the mechanism of investors' heterogeneous beliefs on the formation of stock price bubbles under short selling constraints.First,this chapter makes an in-depth theoretical analysis of the influence mechanism of short selling constraints and investor heterogeneous beliefs on stock price bubbles.In empirical research,this chapter constructs an indefinite Markov regime vector auto regression model(RTV-VAR)embedded in Dirichlet process to characterize the time-varying causality between variables.The results show that the trading mechanism of margin trading in Shanghai stock market has the characteristics of leverage transaction to accelerate risk release.The leverage trading characteristics lead to asymmetric expression of investor sentiment,which leads to the wrong pricing of stocks.However,the margin trading in Shenzhen stock market does not show strong leverage trading characteristics.During the active stock bubble of Shanghai and Shenzhen stock markets,the positive influence of investors' heterogeneous beliefs on margin trading shows that the willingness of investors to express with the help of margin trading instruments becomes stronger.Therefore,the rapid rise of this positive impact can be used as an early warning signal for abnormal stock price fluctuations.The sixth chapter focuses on the contagion effect of stock price bubbles.First,according to the PSY method,this chapter identifies asset price bubbles in sub sectors of China's stock market and constructs a proxy variable of asset price bubble scale through the trend matching method of PE ratio and BSADF statistics.Then,the time varying vector autoregressive model with time varying volatility and generalized variance decomposition are used to construct the time varying dynamic DY connectivity index,and the stock bubble contagion between industries from December2012 to June 2020 is calculated.The results show that,firstly,the overall dynamic connectivity index catches three typical bubbles in China's stock market since 2012,namely,the abnormal fluctuations in the stock market in 2015,the large-scale debt default in the bond market in the early 2017-2018 years,and the Sino US Trade Frictions Since 2018.Secondly,inter-industry bubble contagion has significant timevarying characteristics in both the direction and scale of contagion.On the whole,the asset price bubble spillover impact of industrial,medical and health care and information technology industries continued to be positive,indicating that these three industries are the most bubbly infectious,while the energy,major consumption,financial real estate and public utilities industries are the main net receivers of bubble risks and the most vulnerable industries.Finally,the measurement results of the net spillover dynamic connectivity index between two industries indicate that the bubble contagion between industries has significant industry rotation characteristics due to the guiding effect of investor sentiment caused by the change of bubble size of industry itself and the change of business relevance with other industries.Chapter seventh focuses on analyzing the monetary policy effect of stock price bubble and real estate price bubble in China.Firstly,this chapter briefly demonstrates that the change of interest rate has different effects on the basic value component and the bubble component based on the rational asset price bubble theory under the framework of local equilibrium.Then in the empirical analysis,the TVP-VAR model is used to analyze the impact of the exogenous tightening monetary policy shock represented by the rise of short-term nominal interest rate and the expansionary monetary policy shock represented by the M2 money supply on the potential target variable of monetary policy.Finally,according to the theoretical analysis results,the impulse response function is used to construct the impact of interest rate shock on the intrinsic value component and bubble component of asset prices.The results show that the exogenous tightening price monetary policy shock can cause the temporary decline of stock prices,and the rise of bubble component is more significant than the decline of basic value component.In addition,the monetary policy will cause real estate price bubbles to rise in the short term and fall in the long term.Therefore,the use of contractionary price policies to control asset price bubbles,not only cannot achieve the effect of effectively restraining bubbles but will damage the basic value of stocks.Expansionary quantitative monetary policy will lead to a significant rise in asset prices,but its impact on the dividend variable is uncertain.In addition,the expansionary monetary policy has a more significant policy lag effect on the real estate price bubble.Therefore,the traditional "contrarian" strategy has great uncertainty about the effect of asset price bubbles,even counterproductive.